Question

If the APR of a savings account is 3.6% and interest is compounded monthly, what is the approximate APY of the account?

Answer 1

The Answer is ''3.66%''

Answer 2

3.66% ( approx )

Explanation:

Since, the formula of annual percentage yield is,

`APY = (1+(r)/(n))^n-1`

Where,

r = stated annual interest rate,

n = number of compounding periods,

Here, r = 3.6% = 0.036,

n = 12 ( ∵ 1 year = 12 months )

Hence, the annual percentage yield is,

`APY=(1+(0.036)/(12))^(12)-1=1.03659 - 1 = 0.036599\approx 0.0366 = 3.66\%`